By
Benjamin Njiri
April 23rd, 2024
Coinbase noted that there’s a growing interest among institutional investors for staking cryptocurrencies and generate passive income out of it.
On Monday, August 1, Coinbase Prime announced that it will be adding support for Ethereum (ETH) to its list of staking options available for US institutional clients. This will provide yet another crypto on-ramp to institutions looking to enter the crypto space.
Institutional investors have been showing more interest in Ethereum these days. Amid the market recovery last month, Ethereum investment products recorded net inflows after weeks of outflows in the previous weeks.
Ethereum staking has been getting popular among investors looking to gain good yields over staking their ETH holdings. Thus, generating returns through staking will also be an attractive proposition for institutional investors. Aaron Schnarch, Vice President of Product, Custody, at Coinbase said that the company will provide a fully-integrated staking experience to institutional clients. He added:
“Coinbase Prime provides institutions with an end-to-end staking experience. Clients can create a wallet, decide how much to stake, and initiate staking from the ETH asset page on their Coinbase Prime account. Securing client funds is our highest priority. We hold withdrawal keys in our cold storage custody vault at all times, meaning staked ETH and accumulated yield are always safe. To further ensure the security of client accounts, staking transactions must first complete consensus before they are executed”.
Coinbase has also clarified on the ETH2 ticker that its users represent clients’ staked ETH. Coinbase Prime noted that “there is no separate/new “eth2” token or asset”. As developers successfully complete the upgrade to Ethereum 2.0, Coinbase noted that ETH and ETH2 will merge in a single ticker. As per the existing schedule, The Merge upgrade on the Ethereum mainnet will likely happen by September 2022.
Institutions Showing Interest in Staking
The ability to generate a passive income through staking is one of the major attractions of staking for institutional clients, says Coinbsae. Furthermore, institutional players could likely bring more legitimacy to the staking process. Aaron Schnarch said:
“The Ethereum blockchain rewards stakers that do a good job, but also punishes those that fail in their duties, for example by having downtime. This is why it’s important to stake with a reputable and effective provider to earn maximal rewards while minimizing risk”.
Besides, the staking rewards can also serve as compound interest. Users receive the staking rewards in the form of tokens they stake. Thus, they can “reinvest” to receive higher payouts every subsequent time.
Apart from Ethereum, Coinbase Prime offers institutional staking for Solana, Polkadot, Cosmos, Tezos, Celo, and more.